Computer giant Apple is facing a legal challenge from an activist investor who wants the group to return a bigger slice of its $137 billion (£87bn) cash pile to shareholders.
The move comes as the maker of Mac computers and iPad tablets grapples with a tumbling share price, mounting competition in the smartphone markets and concerns about its ability to produce new breakthrough products.
Hedge fund manager David Einhorn, founder of Greenlight Capital, claimed that Apple had a “Depression-era” mentality that led it to hoard cash.
In March last year, just months after the death of co-founder Steve Jobs, Apple responded to a barrage of investor criticism by initiating a quarterly cash dividend and a share buyback that would pay out $45bn over three years.
However, Greenlight is taking legal action over proposed changes to Apple’s corporate charter that would require shareholder approval before it could issue preferred stocks, which function like bonds because they pay a fixed dividend over time. Shareholders are due to vote on the proposal at its annual meeting on 27 February.
In an open letter to investors, Greenlight said: “We understand that many of our fellow shareholders share our frustration with Apple’s capital allocation policies. Apple has $145 per share of cash on its balance sheet. As a shareholder, this is your money.”
Apple retaliated by insisting that the change to its charter would not prevent preferred share issuances in the future.
The group said: “Currently, Apple’s articles of incorporation provide for the issuance of ‘blank cheque’ preferred stock by the board of directors without shareholder approval.
“If the proposal is adopted, our shareholders would have the right to approve the issuance of preferred stock.”
Einhorn, who holds 1.3 million shares worth about $600 million, urged Apple shareholders to vote against the plan, and put forward his own proposal for the issue of preferred stocks with a perpetual 4 per cent dividend.